💬 Community Chat: Decoding the VC Playbook
Bridging the Growing Gap Between Founders and Investors: Insights on Raising Capital, Investor Fit, and Building Lasting Partnerships
Decoding the VC Playbook with Eric Rubin
The chasm between venture capitalists and founders has never been more pronounced. As raising capital has become a status symbol in the startup ecosystem, investors have shifted away from their operator roots to a more financially-driven mindset. This shift has led to a loss of empathy and understanding for the needs of founders—particularly when it comes to the urgency for fast decisions, clarity in action, and strong connectivity (access and responsiveness).
Founders often enter fundraising without sufficient knowledge of key venture dynamics: the power law governing returns, the approval processes involving deal committees, and how the current performance of a fund can significantly affect the types of investments they are willing to make.
Just as investors meticulously assess whether a founder is someone they want to back for the next decade, founders must also see themselves as selecting long-term partners. Founders need to do their own due diligence, research the investor's portfolio and strategy, and seek out candid, transparent conversations to build a partnership based on mutual respect and shared goals.
Overview of the Chat:
In this conversation, Eric Rubin from Red Swan Ventures discussed critical insights on navigating the VC landscape, the importance of founder-investor fit, and how to build lasting partnerships in the early stages of a company. The discussion covered:
The Founder-Investor Relationship: Founders need to position themselves as the right person for the product and ensure they choose investors that align with their business.
Investor Conviction: Building investor confidence involves consistently demonstrating progress, achieving milestones, and maintaining open communication.
VC Structure and Incentives: A look inside venture capital firms’ structure and motivations, and how these factors affect the decision-making process.
Valuation and Ownership: Understanding how valuations (pre-money vs. post-money) and dilution work in subsequent funding rounds is crucial for founders.
Key Takeaways:
Cap Table Considerations: Be discerning about the type of investor you include on your cap table—not all investors bring the same value. Many lean more towards asset management than hands-on operations, creating a gap in empathy and practical support that founders often need.
Investor Fit: Both founders and investors should treat the relationship like a long-term partnership, with each side conducting thorough research and aligning expectations.
Transparency is Key: Founders should look for investors who provide clear, actionable feedback, fast decisions, and ongoing communication.
Understand Venture Economics: Founders need a deeper understanding of VC economics (power law), deal approval processes, and how the fund’s current performance can influence investment decisions.
Check out the full conversation in the recorded chat
Eric is currently a Principal at Red Swan Ventures. RSV is a pre-seed/seed fund founded by Andy Dunn and has backed companies such as Coinbase, Scopely, SeatGeek, Hinge, Warby Parker, and many others. Before VC, Eric was an early stage operator at two different venture-backed companies, Second Measure and Pie. He started his career at Goldman Sachs before pivoting into technology startups.
Danny is a member of P33's Founders Team, where he leads initiatives to accelerate the flow of capital in Chicago's tech ecosystem. With a rich background in early-stage ventures, he has contributed both as an operator—most recently at Reforge and previously at Section4—and as a part of venture investment teams. A lifelong Chicagoan with deep industry connections, Danny excels at linking founders with the essential resources and networks they need to build durable and successful businesses. He holds an MBA from the University of Chicago Booth School of Business and a Bachelor's degree from Tufts University. Outside of work, you'll find Danny walking his dog, Murphy, along the 606.